Homework Answers
Debt to equity ratio :
| Debt to equity ratio | |||||
| Choose numerator | / | Choose denominator | = | ||
| Total liabilities | / | Total equity | = | debt to equity ratio | |
| Atlanta company | $429000 | / | $572000 | = | 0.75 |
| Spokane company | $549000 | / | $830000 | = | 0.6614 |
The debt equity ratio indicates the portion of liabilities (outsider's) and portion of equity (owner's ) used to own the company's assets.
Atlanta company has debt equity ratio of 0.75 :1,that means company's assets are financed in the ratio of 0.75:1 by outsiders and owners respectively.
Spokane company has debt equity ratio of 0.6614 :1 , that means company's assets are financed in the ratio of 0.6614:1 by outsiders and owners respectively.
Note : as there is no specific instruction in the question regarding rounding off the decimals, the final answer is rounded off to four decimals. If not the Spokane company debt equity ratio can be taken as 0.66 :1
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100 QS 10-14 Debt-to-equity ratio LO A3 Total liabilities Total equity Atlanta Company $429,000 572,000 Spokane...
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Montclair Company is considering a project that will require a $500,000 loan. It presently has total...
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Which company has a riskier financial
structure?
a. Compute the debt-to-equity ratio for each of the following companies. Atlanta Company Total liabilities $ 429,000 Total equity 572,000 Spokane Company 549,000 1,830,000 $ Debt to equity ratio Choose Numerator: 1 Choose Denominator: = Debt-to-equity ratio Atlanta Company Spokane Company
Total liabilities Total equity Atlanta Company $ 610.000 630,000 Spokane Company S466.200 1.648,000 Compute the debt-to-equity ratio for each of the above companies. Book Debt to equity.tatio Choose Denominator: + Debt-to-equity ratio Atlanta Company Spokane Company Print erences Which company appears to have a riskier financing structure
H 100 Exercise 10-15 Applying debt-to-equity ratio LO A3 Montclair Company is considering a project that will require a $500,000 loan. It presently has total liabilities of $220,000 and total assets of $620,000. 1. Compute Montclair's (a current debt-to equity ratio and (c) the debt-to-equity ratio assuming it borrows $500,000 to fund the project. 2. If Montclair borrows the funds, does its financing structure become more or less risky? 4:03 Choose Numerator: Choose Denominator: Debt-to-Equity Ratio If Montclair borrows the...
(within oute the debt-to-equity ratio for each of the following companies. Which company appears to have a riskier financing structure? Explain. OS 10-13 Debt-to-equity ratio pay ce of Spokane Company 1 Total liabilities ...... Total equity ........... Atlanta Company $429,000 572,000 $ 549.000 1,830,000 19 Curcia Company issues 10%. 15-year bonds with a par value of $240.000 and semiannual interest pay- ents. On the issue date, the annual market rate for these bonds is 14%, which implies a selling price...
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